VAT For Hospitality Businesses Has Reverted To The Standard Rate Of 20%
The VAT reduction, which was first introduced for businesses trading in the hospitality sector in June 2020, ended on Thursday 31 March with the VAT rate reverting to its original rate of 20%.
The reduction in VAT was given to VAT-registered businesses from the hospitality, hotel, and holiday accommodation sectors to financially support them during the initial lockdown of the COVID-19 pandemic. VAT originally dropped to 5% in July 2020 with the rate increasing to 12.5% in October 2021.
Businesses on the Flat Rate Scheme (FRS) should also be aware the FRS percentage for hospitality businesses has also gone back up the standard rate of 10.5% from the reduced rate of 5.5%.
The increase in the VAT rate coincides with other tax increases previously announced including a 1.25% increase to National Insurance contributions (NICs) from 6 April 2022, as well as a rise in the dividend rate by the same amount.
Ensuring that not only the correct VAT rate is applied to invoices but also at the right tax point is essential and will avoid businesses accumulating a potentially large, unexpected VAT bill. We would encourage all those involved in the sector to ensure their bookkeeping systems are updated for the change and take appropriate advice if required.
Alternatively, if you would like to discuss any issues relating to your hospitality business, you can contact our EQ Leisure specialists by emailing [email protected].